The push for expanding the biofuels industry is driving many changes in animal agriculture and there are still more to come, according to John Lawrence, Iowa State University agricultural
"Will there be enough corn to go around?" Lawrence asks. "Yes, but markets aren´t kind, gentle or smooth." He adds that agriculture has become a fuel producer, with the ethanol industry growing faster than economists can make graphs. The growing demand for corn for ethanol production is driving the price of corn up significantly.
The corn market has had relatively flat demand with the exception of ethanol, he says. According to industry estimates, 5.5 million to 10 million bushels of corn will be grown just for ethanol by the year
Corn prices are now more closely linked to crude oil prices. If world oil prices are at $60 per barrel, ethanol plants are expected to expand until corn is around $4 per bushel for corn.
In addition to providing another market for corn, recent increases in ethanol production also mean that there is more dried distillers grain available for livestock feed. Lawrence estimates that there will be about 46.8 million tons of DDGS produced if the industry processes 5.5 billion bushels of corn for ethanol.
Although DDGS may reduce feed costs for pork producers, the price will not be low enough to offset the higher corn price.
New technologies are emerging to produce a better DDGS for hogs, but for now, producers should be aware of where the DDGS is coming from.
"DDGS products will change depending on the plant it comes from and how it´s made," Lawrence notes.
The long-term implication for animal agriculture depends on many factors, including the amount of DDGS incorporated into the ration. The price of DDGS relative to corn and soybean meal prices also is a factor to consider.
Also in the long-term pork producers can expect more corn basis volatility.
"Storage capacity is key," says Lawrence, noting that livestock producers are accustomed to having relatively low-cost corn. Producers need to be aware of their physical control of the grain, now and months from now.
If they haven´t done so already, now might be a good time to consider building and managing storage for feed use year round, he adds.